Digital Realty Sells 80% of Ashburn Data Center to Griffin Capital

Digital Realty Trust announced a $188 million joint venture with Griffin Capital Essential Asset REIT.

Digital Realty is contributing a 130,000-square-foot turn-key data center in Ashburn, Virginia, valued at about $185.5 million, excluding $2.1 million of closing costs, or $20,611 per kW. The joint venture has arranged a $102 million five-year bank loan.

GCEAR will hold an 80 percent interest in the joint venture and Digital Realty will retain the rest and continue to manage the property for management fees.

The transaction generated net proceeds of about $168.4 million for Digital Realty, which will help the REIT pay down debt and fund other investments.

The deal gives GCEA a fully leased property expected to generate about $13 million per year in revenue. The average remaining tenant lease term is about seven years.

The venture is part of Digital Realty’s plan to divest non-core properties in response to changing market dynamics. The company is getting rid of the least-performing properties in its massive global portfolio and changing its mix of product offerings to include solutions that combine its traditional space-and-power offerings with services higher up the stack provided by some of its customers.

Jeff Hoppen, managing director of capital markets for Digital Realty, said, “This joint venture transaction is a significant milestone for Digital Realty, as it furthers our objective of maximizing the menu of available capital options, while minimizing the related cost. The transaction also has the ancillary benefit of reducing our tenant concentration while establishing an attractive private market valuation benchmark for our Turn-Key Flex properties.”

The company formed a similar joint venture with Prudential Real Estate Investors on a fully leased 110,000-square-foot facility in Somerset, New Jersey, in October 2013. It also recently sold a property to an unnamed single tenant that was occupying it for $42 million.